[Guide] - How to use different order types.

[nelson4lov]

When it comes to trading, we're a lot more interested in other concepts of technical analysis like chart patterns, candlestick patterns, indicators, etc. Just like other concepts, order types are also a fundamental unit in trading. Since there are many order types, knowing which one to use at any given is critical. But first, let me discuss what an order type is.

What are order types?
Order types refers to the position at which trader can take at any particular time. Whether it's a long or short, there's an order type for it. That said, let me discuss order types that are available on most crypto exchanges.

1. Market order:
A market order is a type of order that allows us to place an order at the current market price. A possible use case would be when you want to buy or sell immediately, without any delays, market order is the order type you want to use. Although I don't use it often, it's still has it uses.

2. A limit order:
A limit order order offers more flexibility than market order as it allows us to pick a price we're willing to buy or sell at (could be after our market analysis). Unlike a market order where you would typically not be allowed to set a price, with a limit order you can. The most common use case is when you want to only buy or sell an asset when it gets to a specific price level.

3. Stop Limit:
If you've heard about the concept of putting stop loss on your trades, this is it. A stop limit order allows us to put a "stop" to our limit orders. It's an order you want to put in case the trade doesn't go your way and it helps mitigate and reduce losses incurred. It's typically used when we already have an existing position and we want to make sure we reduce our losses when things doesn't go as planned.

For instance, When Bitcoin flash crashed from $12,000+ to ~ $10,550 last week, a stop loss order at $11,900 would have helped you save over around $1400 or more.

Stop limit order (stop loss) is an essential tool is a trader's toolbox if used correctly.

4. Trailing Stop limit:
What if there's a way to track the price while your position is in profit and still trending? In a case, it's tiresome to always keep track of the prices at all time time. What if you can do it automatically? That's where a trailing stop limit order comes in. It is designed to protect profits by allow a trade to remain open and continue to profit as long as the price is moving in our favor. It only closes the trade if the price changes direction by a specified percentage.  Trailing stop limit is a little more advanced as you would need to set parameters like the percentage you want to keep track of. Like stop limit order, its also helpful if used correctly.

5. One-Cancels-the-other  (OCO)

One-Cancels-the-other is an order type that allows us to combine two orders at the same time. It combines a limit order, with a stop-limit order, but only one of the two can be executed at an particular time and when it does, the other one gets canceled automatically.  OCO is my favorite order type as it allows me to have the best of both worlds – set a limit order for a price I'm willing to buy / sell  and also have a stop loss in place when if the market goes in the other direction.

Here's an example use case: Say you bought bitcoin at $9800 and you're more than happy to sell when it gets to $11,000 but whenever it gets below below $9760, you want to place a stop loss in case it drops more. That's where OCO comes in. You can set a limit order at $11000 and a stop limit at $9760.  




The Lesser Known order types:

Aside from the above mentioned order types like limit, stop-limit, market orders, there are other order types that are available but these aren't used as much as the others as they're more technical and advanced. Here's a straightforward explanation:

1.Good 'Til Canceled (GTC) - This order will be placed on the order book and remain valid until you cancel it or when it gets filled.

2. Immediate or Cancel (IOC) - The order will be filled immediately and completely, or it is cancelled without being filled at all.

3. Fill or Kill (FOC) - This order will only complete if the entire amount can be matched. Partial matches are not filled with this order type and will not execute

These type of orders are available on exchanges like coinbase and bittrex.


Trading is profitable when you know the right tools to use at any given time. Just like other trading concepts, knowing the right order type to place at anytime is vital.

As a trader, what is your favorite order type? And why?

Looking forward to your answers 😉

[Charles-Tim]

This is a well written article about order types. I for one prefer to use the limit order, stop loss and OCO, the reason not using market order is because it is risky. It may not be so risky for strong coins like bitcoin because i have used it one or twice before and the price the bitcoin converted to tether was good. But I noticed it is not good for altcoin, especially if it has low market cap.

Market order vs limit order
Be it high or low market cap, limit order is the best option because you will be the one to set the price yourself and you can adjust it to a price your order will be completed in time.

There was a day I used market order to trade digibyte, the current price was at $0.0023 at the time but the order was placed at $0.19, this also happened to me when I purchase curio, and both were great losses for me. So, I am not using market order again. Using the limit order is the better for someone not to lose much funds while trading coins.

The stop lose if used appropriately, it has no issue, it really helps and so is OCO as well.

[GreatArkansas]

As a trader, what is your favorite order type? And why?

Looking forward to your answers 😉

I'll go for Stop Limit, because I believe that this is the one will save me. Using this kind of order will make you become a good and descipline trader, especially if you are margin trading, where the risk is much higher, this should be practice by every trader.
I have a question, why there is no Stop Market? A stoploss where you will set only the market price and the current price will sell/buy your stop market order.

[CryptopreneurBrainboss]

Don't do much of advance trading, as I barely trade but when I do, it usually isn't daily trading. The minimum time duration for me is weekly and sometime it takes months to achieving my trading target.  In regards to the order type, I mostly work with Stop-loss although I don't consider it to be what most traders think. My stop loss are usually in profit, more like a take profit can of thing.

Traders only think Stop-loss should be used in minimizing losses but haven't taught about it working for their profit, like saying you enter a trade that looks very promising but don't want to option out with the take profit order. You can make use of you stop loss as a take profit order. You can read more via my previous reply on the topichere. Nice effort OP.

[Charles-Tim]

I have a question, why there is no Stop Market? A stoploss where you will set only the market price and the current price will sell/buy your stop market order.

For example, if the price of bitcoin is at $9100, and we place stop loss at $9080, it is possible that bitcoin can fall from $9100 to $9070 immediately which means the trade is too tight to be fulfilled, and will not be fulfilled unless the price increase to or above $9080. This may not happen, and the order will not be filled if the price continue to fall.

So, that is just stop loss, the stop market you are taking about is the limit order, else the order will not be fulfilled, it just means for example, if bitcoin is at $9100, the stop loss to be placed at $9100 as the stop market you meant, this will not make the order to be fulfilled at all if the price is dropping drastically, and lead to more losses without any order fulfilled.

So, in conclusion, the stop market you meant is practically impossible if the market continues to fall. To just make the order to be fulfilled, using a little price slightly below current price to make a limit order is better.

[pawanjain]

That's a solid guide to the type of orders for trading. I would recommend beginners to know about all of these but just start with the basics.
Starting to learn to how to trade and focusing the below three type of orders will give beginners a good understanding of how trading works.

Market order
Limit order
Stoploss order

The rest are for advanced traders who always keep an eye on the market. Advanced traders already know what they are doing.

[Nellayar]

As a trader, what is your favorite order type? And why?

Looking forward to your answers 😉

I'll go for Stop Limit, because I believe that this is the one will save me. Using this kind of order will make you become a good and descipline trader, especially if you are margin trading, where the risk is much higher, this should be practice by every trader.
I have a question, why there is no Stop Market? A stoploss where you will set only the market price and the current price will sell/buy your stop market order.

Using stop loss method can let us breath from the bleeding of the stocks and coins we bought. As a short term positioning trader, I recommend to use stop loss everytime we buy a coin. It is really a must to cut our losses so that we can do scalping or lessen the risk that we can take to the coin.

Usually, I make my trades 2:1 ratio. Wherein I am going to buy at retracement, looking for a 10 percent gain and when there is unexpected thing to happen, my stop loss would be at 5% of my trades. Cut loss does not means we lose in whole trades, it just making our decision more healthy and play safe to a possible downtrend or reversal.

[ryzaadit]

Which exchange who provide "One-Cancels-the-other (OCO)"

Looking at this feature cause most of the exchange only can do one order for every order, so this could helpful. Will try use the exchange, if the exchange was quite popular or not from a small exchange.

[Bitum]

Hardcore only: Market order. But if serious, I prefer limit order, which I find quite relaxed, order set and wait, no stress. But you need a lot of patience for that

[ryzaadit]

no stress.

No stress?

Your stress, coming out when making some buy/sell order but unfortunately the real price going down more than the price order you has been set up. Makes you getting a lose after the buying order was filled or maybe late to sell when the failing broke the resistance support.

[rexxarofmoknathal]

Another great post from you, newbies should bookmark your profile and read through your threads before they begin trading. Would probably end up saving them money.

Are you planning on doing a thread about derivatives trading, e.g. going over key terms like leverage, liquidation, cross-margin etc?

[khaled0111]

Great guide OP. It came just in time as am planning to start day trading again and honestly had no clue what those terms meant.
I read the whole topic but still unable to grasp the meaning of most of the terms. I think i'll have to read it again.

For example, what's the difference between Stop Limit and One-Cancels-the-other and for Immediate or Cancel how long will it take before the order gets cancelled?
 

[Charles-Tim]

For example, what's the difference between Stop Limit and One-Cancels-the-other and for Immediate or Cancel how long will it take before the order gets cancelled?

Stop limit or stop loss
It has three features:
1. Current price
2. Limit order
3. Stop price

For example, bitcoin current price for tether is $9500, you can set the stop price to be $9300 and the limit order to be $9250. This means an order of $9250 bitcoin to by tether will be fulfilled mediately the price of bitcoin get to $9300

Immediate or Cancel (IOC)
It means if you want to place the order, if the market price favor the order, the order will be placed immediately, but if the market does not favor the order, the order will be canceled immediately.

For example, bitcoin price is at $9500, if you use IOC order at $9490 to buy tether, the order will be canceled immediately because nobody in your exchange to sell for lower price.  But if you place IOC order at $9510, the order will be fulfilled immediately. So, this order if not fulfilled immediately, it will be canceled.

 
One-Cancels-the-other (OCO)
For OCO, you can use the below link for you to understand it. And from the link is the example below. 
https://www.google.com/amp/s/academy.binance.com/tutorials/what-is-an-oco-order%3famp=1

You have 300 USDT in your account, and you think the overall trend of the BNB/USDT market is going up. You want to enter the market at a reasonable price. The last traded price of BNB is 28.05 USDT, and the resistance is around 29.50 USDT. You want to buy BNB when it hits 27.00 USDT, but you also don’t want to miss out on the opportunity when the price breaks the resistance price. Therefore you can place an OCO order with a quantity of 10, which combines a limit buy order and a stop limit buy order. The price of the limit maker order is 27.00 USDT. For the stop limit order, the stop price is 29.50 USDT and the limit buy price is 30.00 USDT.

But I believe you know day trading is very risky, using lowest possible amount for it for months is better for learning.

[khaled0111]

...

Thank you for the detailed explanation but I have to admit that it's a bit over my head 
I think I should start with the basics before jumping into this as it seems it requires a little knowledge about TA too!
Meanwhile, I'll test out few of these orders with small amounts just to better understand the difference between them.

[nelson4lov]

~
Market order vs limit order
Be it high or low market cap, limit order is the best option because you will be the one to set the price yourself and you can adjust it to a price your order will be completed in time.

Like you, I rarely get to use market order. A limit order provides me with much more flexibility to get in  at a price I'm either willing to buy and sell.

Which exchange who provide "One-Cancels-the-other (OCO)"

There's OCO order feature on both Binance and Bittrex. You can check it out. The one I usw is that of binance though.

[Dragonfund]

Market order vs limit order
Be it high or low market cap, limit order is the best option because you will be the one to set the price yourself and you can adjust it to a price your order will be completed in time.

It's not about large/ low market cap, it's order book and volume, It can happen to bitcoin or any other coins when trading.
All order type has merits and Demerits depend how and when you use it. There are certain trade that you can not use Limits order type especially when market is crashing(This happens when price dump within minutes). You will end up with huge loss and your order will not be executed.
Sometimes, limit order got jumpout even if you set it before a pump or dump.

There was a day I used market order to trade digibyte, the current price was at $0.0023 at the time but the order was placed at $0.19, this also happened to me when I purchase curio, and both were great losses for me. So, I am not using market order again. Using the limit order is the better for someone not to lose much funds while trading coins.

You have to used market order when necessary, March black Friday came to my mind when BTC flash crash to 3.6k, limit sell order isn't the best such period.